This could be a company that helps expand its capabilities or geographic presence or deepen its strengths in an existing vertical.
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“We will continue to be in the same industry, so we are looking at adding capabilities from an M&A perspective and go deeper in the areas of cloud, data, security or Salesforce, or into geographies like Europe,” said Sandeep Kalra, chief executive of Persistent Systems.
The focus will remain on banking, financial services and insurance (BFSI), healthcare and life sciences, and hi-tech.
Persistent has about $268 million in cash on its books and will use this towards acquisitions that meet strategic business objectives or financial criteria such as revenue growth and return on capital.
“Our sweet spot is between $10 million and $50 million in terms of revenue of the target entity, though we may occasionally consider targets outside of this range,” said Kalra.
North America is its biggest market, at about 80% of revenue, followed by Europe at about 10%.
It intends to increase revenue share from Europe going forward.
In India, the company has been working with non-banks, and the country contributes about 9% to revenues.
Kalra said this was likely to remain at similar levels and grow in line with the company’s growth.
The Pune-headquartered company last week reported a 32.4% increase in net profit at Rs 340.28 crore and 17.4% higher revenues at Rs 3,565.80 crore for the previous fiscal year.
Kalra said its key verticals — BFSI, healthcare and technology services — were growing well and the company had a strong order book and deal pipeline going in 2022.
“Even while there is so much uncertainty, people are fairly certain about the longer-term future of their own business, which is why they are investing in it,” said Sunil Sapre, chief financial officer, Persistent Systems.
The industries that have been impacted are those affected by a lack of movement of people, and these will take time to recover.
Banks are investing in becoming more digital, on app modernisation and moving to the Cloud, while in healthcare the focus is on improved patient engagement digitally, all of which is translating into bigger deals for Persistent.
“Persistent reported a robust 4QFY21 earnings performance, with its large deal strategy continuing to drive growth in the services business despite weak alliance seasonality,” said Harit Shah, senior research analyst at KRChoksey Shares & Securities.
“Management commentary on sustaining deal TCV in the $200-$250 million range further drives confidence on underlying business momentum, with the alliances business likely to further contribute to growth apart from services,” he said.
The company announced a wage increase in November 2020 and will follow its usual appraisal cycle from July 2021.
Persistent will continue to hire over the next few quarters, it said.